Via Financial Times

Boeing has asked for a $100m a year tax break from Washington state to be suspended in a bid to stop the EU from imposing billions of dollars in retaliatory tariffs this summer, when it is hoping to bring its troubled 737 Max back into service.

Washington state lawmakers on Wednesday introduced bills in the state’s senate and house proposing the end of a business rate tax break for aerospace companies that has saved Boeing more than $1bn since 2004.

The move threatens to nullify Brussels’ argument to the World Trade Organization that Boeing continues to benefit from illegal state aid — the basis on which the right to impose tariffs was expected to be granted later this spring.

Jay Inslee, Washington governor, said Boeing had asked the state to act ahead of expected EU tariffs, the latest sally in a 15-year long dispute between Boeing and Airbus over government subsidies.

Both sides have been found to have received illegal aid in what has become one of the longest-running trade disputes conducted through the WTO.

Boeing said in a statement that the legislation, when passed, would resolve the sole finding against the US in the dispute. It accused Airbus of continuing to benefit from “billions of dollars of illegal ‘launch aid’ subsidies . . . which the WTO has repeatedly found to violate global trade rules”.

Mr Inslee suggested, however, that Boeing had asked for the tax break to be “at least suspended” which could leave leeway for the EU to argue that it could still impose tariffs, if this is sanctioned by the WTO in the coming months.

Last year, the WTO authorised the US to slap levies on $7.5bn of goods after the EU was found to have failed to eradicate illegal support for Airbus aircraft. In October tariffs of 10 per cent were imposed on aircraft imports and 25 per cent on a range of other European goods. On Friday, the levy on aircraft imports was raised to 15 per cent.

READ ALSO  Why Macron’s attempt to reset French ties to Africa has hit trouble

Airbus and EU officials have suggested they could win approval for a tariff offensive running to billions of dollars as well.

Guillaume Faury, Airbus chief executive, at the European aircraft maker’s results last week, suggested these would be targeted to make it more difficult for Boeing to deliver its single aisle 737 Max into Europe. The aircraft has been grounded since March after two fatal crashes, but Boeing and its regulators have signalled it could be cleared to fly again later this year.

Both sides have called for a settlement, although neither is willing to make the concessions the other side demands before negotiations begin. Boeing has called for eradication of all government support including launch aid loans.

Washington’s governor said the bill to suspend the tax break had been introduced for fear that EU tariffs “would damage not just our commercial aircraft industry, but other important Washington exports”.

But the change could still take some time to come into effect, he said. “We need careful consideration of the issues and precision work on the legislation which involves not just state tax law, but international trade agreements and domestic trade law,” Mr Inslee said.

Airbus declined to comment.

The battle between Boeing and Airbus dates back to 2004, the year after the European aircraft maker’s deliveries overtook those of its US rival for the first time. The US case challenged subsidies that the European aerospace group had received as long ago as the 1970s. The US has claimed that $22bn in illegal funding has found its way to Airbus.

READ ALSO  The character of US democracy is on the ballot

The EU followed up a few months later with a challenge of its own, alleging that more than $23bn in illegal aid has been channelled to Boeing. In 2010 and 2011 the WTO ruled that both companies had collected billions in unlawful assistance — Boeing from government contracts for defence and space business as well as tax breaks, and Airbus through aid to launch aircraft programmes that was repayable on delivery.